Jobs data not accurate reflection of NC economy

Allen Freyer Contributing columnist

March 7, 2014

Over the past few months, Gov. Pat McCrory has been claiming his policies — especially cutting unemployment benefits — are responsible for reducing the state’s unemployment rate. He’s even branded this the “Carolina Comeback.” But as it turns out, the governor’s claims largely rest on treating jobs numbers like fruit — like apples, oranges, and cherries. In fact, the evidence for a Carolina Comeback is just plain rotten, and we’re still waiting for a real recovery in the state’s jobs market.

Most economists prefer to compare apples to apples by looking at job growth from year to year. And by any comparison of apples, the year stretching from December 2012 to December 2013 was worse than the year before. Specifically, the year between December 2011 and 2012 saw the creation of 89,900 jobs, while the same period in 2013 saw the creation of just 64,500 jobs.

Even worse, over the last year, only three of every ten jobless workers who moved out of unemployment actually moved into a job in 2013. The rest just left the labor force altogether. Since December 2012, the labor force contracted by 66,500 workers, more than 1.5 percent, to the lowest levels in three years. At the same time, only 32,600 unemployed workers found employment. And all this while the state’s working age population continued to grow.

All of these hard facts negate the Governor’s tired argument that unemployment benefit cuts somehow boosted employment. Backers of this claim argue something like this: Unemployment benefits cuts took effect on June 30, forcing jobless workers to go get a job. As a result, they say, the period from August to December saw the unemployment rate drop from 8.7 percent to 6.9 percent and saw the creation of 57,000 new jobs — far more jobs than were created during the first 6 months of the year. Voila, cutting unemployment benefits created jobs and reduced unemployment.

While we all want unemployment to go down, claims that cuts to unemployment benefits resulted in jobless workers going out and getting jobs are just nutty.

First, the Governor and his allies are comparing apples to oranges when they try to compare changes in employment from one half of the year to the other half. As any good economist will tell you, this kind of interpretation is inaccurate for the simple reason that employment numbers naturally swing from month to month based on seasonal hiring patterns.

As a result, it’s virtually impossible to tell whether employment changes from one month to the next were caused by a policy decision or by seasonal hiring patterns. So while the jobs numbers from August to December went up faster than they did from January to June, there’s little reason to believe that unemployment benefits cuts were responsible. In fact, the same thing happened in 2012—without any benefits cuts; the second half of the year showed bigger employment growth than the first half.

If mixing apples and oranges weren’t bad enough, the Governor and his allies also make the mistake of cherry-picking the jobs numbers from the months they like, while ignoring the months with jobs numbers that weaken their claims. In this case, they start with August, instead of July, the month the benefits cuts actually first took effect. This means their numbers appear to taste a lot sweeter than they really are if we include July.

So what happens if we compare apples to apples over the correct time period? The Governor’s claims fall apart. Remember, the Governor’s entire argument rests on the idea that his decision to cut unemployment benefits starting June 30 caused something special to happen in the North Carolina job market during the second half of 2013.

But it turns out that the second half of 2013 was decidedly less special than the same period in 2012. If we compare North Carolina’s job creation record from the July-to-December 2012 to the same period in 2013, it turns out that 2012 was much better—2012 created 5,000 more jobs and saw the number of employed people grow by 17,000 than the same period in 2013. This means that the Governor’s much-touted “comeback” hasn’t actually happened yet.

So this is how jobs numbers are like fruit—they help us understand that the Governor’s claims about a Carolina Comeback are just plain bananas.

Allan Freyer is a Policy Analyst at the North Carolina Budget and Tax Center.